TaxTMI 
TaxTMI 
TaxTMI 
2024 (3) TMI 573
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.... 40 years. The facts and the background of the entire issue have been explained before us in the following manner:- 1. Overseas Impex Pvt. Ltd (OIPL) was a tenant of a residential flat being Flat No. 15, 4th Floor, Park View Building, Little Gibbs Road, Malabar Hill, Mumbai - 400 006 since 1965. The Company had been the tenant by way of Leave and License agreement dated 1-5-1965 between Mr. Amrit Sagar Puri (Landlord) and the company (Tenant). 2. The original agreement between OIPL and Landlord was for a period of 5 years. However, at the end of agreement, OIPL refused to vacate the flat. Mr. Puri, the Landlord, filed a suit against OIPL. The Court ruled against the Landlord and held OIPL to be a deemed tenant of the residential flat The Landlord, thereafter, filed several suits against the earlier ruling i.e. suit Nos. 596/1632 of 1998 and Suit No. 827/1306 of 2003 to evict OIPL from the said premises. 3. As such, while the tenancy right of the flat was with OIPL, the flat was occupied by Late Shri Kishor Tejura (who was then a director of OIPL in 1965) along with his family & brother's & uncles as a joint family. Many of the occupants of the Tejura family moved on or pa....
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.... OIPL will pay Rs. 75,00,000/- each to Mr. Mayank Tejura and Mr. Rakesh Tejura for vacating the said flat and seeking suitable alternative accommodation at their cost for themselves and members of their family presently residing at the said flat. * Clause-3: The payment of Rs. 1.50 crores as aforesaid shall be made to both the directors only after they alongwith all their family members have vacated the said Flat and taken away all their belongings, furniture/fixtures etc. * Clause-4: Mr. Mayank & Mr. Rakesh agree that in the above manner, they will be suitably compensated for their occupancy rights of the said flat and they will make no future claims/damages/compensation from OIPL and/or from any director/ shareholder thereof towards any right of occupancy or adverse possession & also that OIPL shall henceforth not be liable to provide any rental/lease/ alternative accommodation in lieu of the above compensation agreed upon and executed * Clause-6: Mr. Mayank & Mr. Rakesh agree to co-operate to all the terms as stated in the MOU on their behalf and also in their capacity as heads of family and as shareholders & directors of OIPL. They shall also co-operate with OIPL in its s....
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....share- holders of the company, the Company finally entered into the Consent Terms with the landlord Mr. Puri. The Consent Terms were filed before the Court of Small Causes at Bombay on 10th May, 2012) A copy of the consent terms is enclosed herewith. Some of the relevant clauses of the consent terms are discussed hereunder: (a) As per Clause 3, the landlord had agreed to contribute a sum of Rs. 2,01,00,000/- towards purchase price in respect of the alternative premises that the company may acquire in lieu of the suit premises (b) As per Clause 6, it is expressly clarified that the landlord did not have any further obligation or responsibility to assist the company in acquiring alternative accommodation and the company had agreed that on receipt of Rs. 2,01,00,000/- from the landlord, the company had no further claims or demand of whatsoever nature against the landlord in respect of delivery of quiet, vacant and peaceful possession of the suit premises by the company to the landlord (c) As per Clause - 8, the company is required to vacate and hand over quiet, vacant and peaceful possession of the suit premises to the landlord in the manner stipulated in the consent terms As su....
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.... Le. Mr Mayank Tejura and Mr. Rakesh Tejurs. Further, it also emerges that both Mr. Mayank Tejura and Mr. Rakesh Tejura has given an undertaking in the court to deliver quiet, vacant and peaceful possession of the suit premises. As such, it is clear that the amount received by both Mr. Mayank and Mr. Rakesh Is for surrender of the right of occupancy of the flat which they have been occupying since birth. As per clause 16, it has been clarified that in the event of the company failing to hand over the possession of the suit premises to the landlord on the stipulated date under the consent terms, then the landlord shall be entitled to claim mesne profits from the company from the date of filing of the suit till the date of the consent terms and also the company shall forthwith return Rs. 2,01,00,000/- to the landlord On reading of this clause, it becomes clear that the possession of the property was essence of the contract. Not giving of the possession would have resulted in returning the entire amount of Rs. 2,01,00,000/- by the company and also mesne profits from the date of filing the suit to the date of consent terms. This establishes the significance of the handing over the ....
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....e appellant and joint family members occupying the flat & subsequent consent terms agreed by the company OIPL with Mr. Puri, the landlord. Copies of Computation of Income of the appellants are enclosed herewith. 15. Since the cost of acquisition in the case of the appellant was NIL, the entire amount of Rs. 75 Lakhs had been reflected as Long Term Capital Gains. Further, the appellants claimed exemption under section 54F of the Act in respect of the Long Term Capital Gains on transfer of the right of occupancy by way of extinguishment of the said rights. 4. However, the ld. AO held that the amount of Rs. 75,00,000/- is taxable in the hands of the assessee as 'income from other sources'. The reason being that assessee has received this amount not on account of surrender of transfer of tenancy rights as assessee was never the sub-tenant of the said flat by virtue of any legal agreement or by payment of any rent to the tenant. The landlord had paid sum of Rs. 2,01,00,000/- towards purchase price in respect of alternative terms that the company may acquire in lieu of suit premises. He has also reproduced relevant portion of the consent terms. (a) As per Clause 3, the landlord had ....
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....appointed by the court shall permit Mr. Mayank Tejura and Mr. Rakesh Tejura and their family members to occupy the suit premises for a period of four months only for the sole purpose of enable the defendant to acquire and shift to alternate accommodation alongwith removal of articles, furniture, fittings, fixtures, property of the said directors and their family members lying in the suit premises. Accordingly, the directors of the company had given undertaking to the court to deliver quiet, vacant and peaceful possession of the suit premises to the court receiver. 5. He further distinguished various judgments relied upon by the assessee and distinguished it on the facts of the present case. Finally, he taxed the amount after observing and holding as under:- "In short, in this case, OIPL is a tenant in the property for which it was paying rent to the landlord. OIPL, being the closely held company, decided to use the flat for the residence of its directors. There was no resolution before handing over this flat to the directors. The directors (ie, assesse and his brother) occupied the said premise only in the capacity of being the director of the company. The directors did not pay ....
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....enant and was living in the rented property of the company, then assessee does not have any right in form of capital asset and therefore, the amount has rightly been held not taxable in the head 'capital gain' and in fact it has to be taxed under the head 'income from other sources' being residual. 8. We have heard the rival submissions and perused the relevant materials placed on record and relevant findings given in the impugned order. It is not in dispute that the company OIPL was a tenant in the residential flat pursuance of leave and license agreement dated 01/05/1965 and thereafter, the company continued to have the possession of the flat. For vacating the flat, a suit filed by the landlord against OIPL. The Court ruled against the Landlord and it was held that OIPL is a deemed tenant of the residential flat. Thereafter, various suits were filed by the landlord for eviction. Finally, consent terms were agreed into and out of Court settlement was made between landlord and OIPL for vacating the flat an in lieu thereof, a sum of Rs. 2,01,00,000/- was paid to OIPL by the Landlord for vacating the flat. Now, the assessee is contending that, since assessee and his family members (....
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....eived is taxable in the hands of the company OIPL and if any such amount paid to the assessee by the company is out of its income, which cannot be taxed as 'income from other sources' in the hands of the assessee. The reason being, the amount has been received by the assessee from the company so that company can honour the consent term with the landlord for peaceful vacation of the flat and assessee had no role in the consent term. * Thirdly, the amount to be taxed in the hands of the assessee has to be in the nature of income which assessee had earned from company carrying out any activity or surrendering any right or asset in favour of the company which can be assessable under any head. Here the money has been received by the assessee from the company so that company can discharge its obligations; it has nothing to with the assessee. In the hands of the assessee it is purely a capital receipt which he has received from the company so that company can give undertaking to vacate the premises in the favour of the landlord for which company was paid compensation. * Lastly, If at all, the amount of entire compensation was taxable in the hands of the company which we find that it h....